IMF, Senegal reach staff-level agreement on $217 million loan

(Representative image/Source: Reuters)

The International Monetary Fund (IMF) and Senegal have reached a staff-level agreement on economic and financial policies under which the West African country will receive a $217 million loan if approved in late June, the IMF said.

Once approved, the loans will help authorities cushion the impact of soaring fuel and food prices, made worse by the war in Ukraine, and the economic slowdown of Senegal's main trading partner Mali, which is facing sanctions for failing to restore democracy since a 2020 coup, the IMF said in a statement late on Thursday.

The staff-level agreement was reached after an IMF delegation visited Dakar this week, and is subject to approval from the fund's management and the executive board, which is expected to meet in late June.

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Following its visit, the IMF also lowered economic its growth projection for Senegal this year to around 5% from an initial 5.5% forecast, with inflation projected to reach 5.5% due to higher food and energy prices.

Average inflation was contained at 2.2% in 2021.

"The authorities have adopted a supplementary budget to incorporate additional spending for energy subsidies, public wages, cash transfers, and security," the IMF said.

Those measures will bring the fiscal deficit to 6.2% of gross domestic product this year against an initial forecast of 4.8% of GDP outlined.

Policy measures have been agreed to avoid budgetary slippages and ensure fiscal deficit will still converge to 3% of GDP by 2024, it added.

Senegal, a coastal lower-middle-income West African nation of around 16.7 million, was hit hard by border closures during the pandemic that affected tourism and delayed oil and gas extractions.